Posts tagged ‘Energy Security’

In the world of crude oil trading and energy security, some cardinal rules apply — never destabilize your most secure source of supply and never upset a trading relationship with the largest supplier in the market.

Chinese trader Unipec broke both rules at one go and the timing was terrible.

Countries lacking abundant energy resources are often the most effective in ensuring reliable supplies, usually through a mix of pragmatism and openness to foreign investment. But this becomes ever more difficult at a time of rising political tension.

The latest Russian poisoning scandal has highlighted not so much the UK or Europe’s dependence on Russia for energy, but the extent to which energy supply in much of Europe is highly diversified, with multiple sources, delivery methods and intermediaries making it difficult for countries or leaders to intervene for political ends either on the supply or the demand side.

Relations between Russia and Ukraine in the gas sector have been infamously strained for more than a decade, with the memory of the cut in supplies to Europe in both 2006 and 2009 still fresh in people’s minds.

There was a brief period of relative stability in the past two years while the Stockholm arbitration court considered its verdict in the dispute over the 2009 Gazprom/Naftogaz supply and transit deal.

But the dispute erupted again last week after the court ruled in Naftogaz’s favor on the transit element of the case, awarding Naftogaz $4.6 billion in compensation for Gazprom’s underuse of its transit network.

The launch of increasingly long-range North Korea missiles this year, threatening the US territory of Guam in the Pacific Ocean, and then the firing of a missile over the Japanese island of Hokkaido this week, indicate Pyongyang’s willingness to test US and Japanese red lines.

It suggests a recognition that the US has no good options, but at the same time runs the risk, particularly with an unpredictable US president in post, of escalating tensions to the point of retaliation.

Western sanctions against Moscow have hurt the Russian economy and restricted some energy projects, but they have failed their main objective of persuading President Vladimir Putin to change his policy in Ukraine. It will continue to have a limited impact unless they are made tougher, the Atlantic Council argued in study released last week.

There’s a video doing the rounds on social media that explains how the UK’s foreign policy toward Europe hasn’t changed in 500 years. It’s from a political sitcom written more than 30 years ago but still sounds plausible.

With oil production in North America on a seemingly unstoppable upward trend, it is not uncommon these days to hear how the world might be able to relax a little in the knowledge that its oil demand is more or less guaranteed to be met in the short to medium term.

But there is no room for complacency, with the International Energy Agency warning on Friday that supply continues to be disrupted across the world, both within OPEC member countries and elsewhere.

Cyber assault is emerging as the principal concern for energy security. One oil major told me a few days ago: “We’re constantly under cyber attack.” But there is still a sense of denial hanging over the issue.

So while no less a figure than US Defense Secretary Leon Panetta can describe the al-Shamoon virus which assaulted Saudi Aramco and Qatar’s Rasgas in August as constituting probably the most destructive attack the business sector has yet sustained, Saudi Aramco itself has sought to downplay the impact. › Continue Reading